Home Appraisal System Changes May 2009-Home Valuation Code of Conduct

The rules for home appraisals have changed. On May 1, 2009 something called Home Valuation Code of Conduct (HVCC) was implemented by Fannie Mae and Freddie Mac. The Code is based on an agreement between the Enterprises (FNMA and FHLMC), the New York State Attorney General Andrew Cuomo and FHFA to improve the reliability of home appraisals.

The revised Code builds on already  existing Fannie Mae and Freddie Mac seller-servicer guidelines to increase the reliability of appraisals for loans sold to the Enterprises for their portfolios or for securitization. The Code applies to lenders that sell single-family mortgage loans to the Enterprises beginning May 1, 2009.

What this codes means for home buyers and home sellers:

1-    If you are a buyer who will be getting a Conventional loans; Lenders, Banks, loan officers, Realtors, and borrowers can no longer order appraisals directly with an appraiser.

2-    Appraisals must be ordered through a third party “Appraisal Management Company” which will be comprised of many appraisers.  The lender places an order for an appraisal, but they will have no idea who will be doing the appraisal.

3-    If there are any conditions or issues with the appraisal one it is  completed,  the lender will have to work with the 3rd party Appraisal Management Company to communicate the issues to the appraiser. Again, the lender cannot speak to the appraiser directly.

This new code of conduct will create some challenges for the real estate industry and for home buyer and home sellers. It may be likely that a home appraiser will be sent to appraise a home in a community where they are not familiar with the home values, or any  special circumstances in the community. The likelihood is that some home will end up not appraising “as expected” by home buyers, sellers or their lenders.

This situation is going to be interesting to watch and see how it affects the market.

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